Question

Deepak, Senthil and Santhosh are partners sharing profits and losses equally. They admit Jerald into a partnership for 1/3 share in future profits. The goodwill of the firm is valued at ₹ 45,000 and Jerald brought cash for his share of goodwill. The existing partners withdraw half of the amount of their share of goodwill. Pass necessary journal entries for adjusting goodwill on the assumption that the fluctuating capital method is followed.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit ₹	Credit ₹
1.	Bank A/c  ...Dr.		15,000	-
	To Deepak's Capital A/c		-	5,000
	To Senthil's Capital A/c		-	5,000
	To Santhosh's Capital A/c		-	5,000
	(Cash brought for goodwill credited to old partner's capital a/c in sacrificing ratio)
2.	Deepak's Capital A/c  ...Dr.		2,500	-
	Senthil's Capital A/c  ...Dr.		2,500	-
	Santhosh's Capital A/c  ...Dr.		2,500	-
	To Bank A/c		-	7,500
	(Cash withdrawn by the partner)

Jerald’s Share of goodwill = `₹ 45,000 xx 1/3` = ₹ 15,000

The sacrifice made by the existing partners is not mentioned. They are assumed to sacrifice in their old share profit ratio = 1 : 1 : 1.

Therefore, Sacrificing ratio = 1 : 1 : 1.